Capitec Bank will probably have to back down from its attempt to block a R500m settlement that would see Regiments Capital repay money it stole from the Transnet Second Defined Benefit Fund (TSDBF).

A Daily Maverick report says Capitec and its senior officers were left red-faced after getting slammed in a court ruling yesterday. The TSDBF had sued Regiments for damages the fund suffered, allegedly as a result of Regiments’ involvement in state capture. Regiments proposed to settle the TSDBF’s claim by selling shares it indirectly owned through a 13-year-old BEE deal with Capitec.

Capitec blocked the settlement, arguing it would dilute the bank’s empowerment credentials, and warned Regiments shareholders it would trigger punitive provisions in the 2006 BEE contract, designed to lock in black shareholders.

The bank aggressively pursued the restrictions, claiming the shares could not be traded without its permission, but then made a complete about-turn before the matter was heard in court.

‘Any person changing its stance so radically and not explaining itself cannot be said to be acting in good faith,’ said Judge Bashier Vally in his ruling.

Capitec had also repeatedly threatened the TSDBF as well as Regiments and its fellow BEE shareholders with litigation should they proceed with the transactions necessary for the settlement.

‘The threat was either grossly careless or deliberately designed to intimidate (BEE) shareholders and directors as well as the TSDBF… Such conduct is not consonant with its duty of good faith and reasonable conduct,’ said Vally.

The judge also noted ‘by refusing to grant consent for the sale on this basis means that it (Capitec) is quite willing to retain Regiments as a shareholder, even though it recognises that Regiments has stolen more than R1bn from indigent pensioners belonging to the TSDBF’.

Full Daily Maverick report

Judgment

According to the ruling, Capitec must, within two working days of the order, give consent to Regiments affiliate, Coral Lagoon, which owns the shares, to sell its 810 230 Capitec shares. Regiments owns 59% of an entity called Ash Brook Investments, which in turn owns 100% of Coral Lagoon, notes a Fin24 report.

The TSDF said it welcomes the judgment. ‘Capitec's consent was the last outstanding barrier to the settlement which will provide elderly and indigent pensioners with value in excess of R600m in compensation for state capture related crimes perpetrated on the fund,’ it said.

In an e-mailed response to Fin24, Capitec said: ‘We are aware of the judgment and will comment after we have had a chance to study it and discussed it with our legal team. We expect to make a statement in less than 48 hours.’

Vally found that Capitec's refusal to give consent to Coral to sell the 810 230 shares, was in breach of its ‘contractual’ and ‘common law duty’ to act in good faith and reasonable conduct towards Coral, as the bank has taken ‘contradictory’ stances on the sale of the shares.

Full Fin24 report